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Following RBI guidelines on reducing the number of free transactions on automated teller machines (ATMs), bankers are nudging customers in metros to use alternative electronic means of transactions to keep costs in check.

The RBI has allowed banks to charge customers a maximum of R20 after five free transactions at their own ATMs. The central bank has also reduced the number of times an ATM can be used for free at banks where the user has no account, from five transactions per month to three (inclusive of financial and non-financial transactions).

Jairam Sridharan, head of consumer banking and payments at Axis Bank, said the rules would apply to machines in the six metros where the density of ATMs is high and not to customers having basic no-frills savings accounts.

Sridharan said the move would help reduce the dependence on cash transactions and prompt customers in metros to use internet and mobile banking.

The cost of a net banking transaction is one-fifth of an ATM transaction and, for mobile banking, it is much lower. We are considering the implications of the RBI circular on our business models and will also be intimating our customers if there are any changes, Sridharan said.

Axis Bank has the second largest ATM network in the country with 12,930 machines as on June 30. Bankers estimate that the cost of a financial transaction is R18 and a non-financial transaction is R11.

SKV Srinivasan, executive director at IDBI Bank, said the move would reduce the interchange fees that banks have to pay and this would guide the rollout of new ATMs for smaller banks.

We will have to see at which locations there are more inter-bank transactions and, probably, install an ATM there to reduce costs, he said. Srinivasan added that banks with large ATM networks would be able to give free transactions and absorb the cost, while others would have to make a call on charging customers. IDBI Bank has 2,538 ATMs across the country and Srinivasan said the bank was looking to expand the number to 3,000 by the end of the year.

While there is no data on interchange fees, SBI, which has the largest ATM network in the country, paid R269 crore to other banks at the end of Q1 FY15. BK Divakara, executive director at Central Bank of India, argued that banks cannot implement the RBI's financial inclusion agenda with more free transactions.

Following the ATM attack incident in Bangalore, the cost of running an ATM has gone up and banks need about 100-150 transaction per day for the cost of an ATM to breakeven, he added.